Red Lobster, the well-known seafood franchise, filed for bankruptcy on Sunday, 19 May 2024. The company cited strenuous lease agreements, high employment expenses, and a major miss with its unlimited shrimp promotion as reasons for this move.
Unlimited Shrimp Promotion Sinks Red Lobster’s Liquidity
In its Chapter 11 filing, the Florida-based chain listed assets and liabilities between $1bn and $10bn each. Under this petition, the company can continue operations while devising debt repayment plans.
Red Lobster will reportedly allow its lenders to control the organisation. According to Bloomberg, these financiers agreed to pay $100m to help the company through its bankruptcy.
The filing reflected that Red Lobster lost approximately 30% of its customers since 2019. Jonathan Tibus, the firm’s chief executive officer, indicated that though the company fared somewhat better after the pandemic, its sales dropped dramatically over the past 12 months, and it suffered losses of $76m during the 2023 financial year.
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Based on Bloomberg information, a “material portion” of the company’s leases was above market prices. That situation, coupled with Red Lobster’s permanent promotion where customers could eat as much shrimp as they liked for just $20, dunked the organisation into stormy waters. It is said the shrimp promotion put an $11m dent in Red Lobster’s financial well-being.
This company started as a single restaurant, which opened its doors in 1968 in Lakeland, Florida. Bloomberg indicated it experienced a growth boom during the 70s and 80s and gained popularity for its Cheddar Bay Biscuits. Presently, Red Lobster has more than 550 restaurants in Northern America.
